Impact of Tax Avoidance on Corporate Performance

This assignment requires students to analyze and summarize a collection of research papers and studies related to tax avoidance and its effects on corporate performance. The provided sources cover various aspects of tax avoidance, including its impact on earnings management, income shifting, and cash tax savings. Students are expected to carefully read and understand the content of each source, identifying key findings and insights that demonstrate the relationship between tax strategies and financial outcomes. By examining these research papers, students will gain a deeper understanding of the complex interactions between tax avoidance and corporate performance, as well as the potential implications for businesses and investors.

Running head: BSBFIM601
BSBFIM601
Name of the Student:
Name of the University:
Author’s Note:

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BSBFIM601
Table of Contents
Profit and Sales Budget...................................................................................................................2
GST Cash Flow Analysis/ Budget...................................................................................................4
Debtors Ageing Budget...................................................................................................................4
1. Identify the current statutory requirements for tax compliance and list and calculate the tax
liabilities for Houzit Pty Ltd under taxation legislation..................................................................6
2. Identify the current compliance requirements and liabilities for this organisation under the
Corporations Act 2001.....................................................................................................................7
3. Review commercially available financial management software to select the most suitable
software for Houzit Pty Ltd.............................................................................................................7
4. Explain how you can apply the following principles of accounting in developing the budgets
required for this task:.......................................................................................................................8
5. Explain and discuss the implications of probity when preparing and revising budgets...........9
6. List the critical dates and initiatives that will require or generate resources for Houzit Pty
Ltd in the next financial cycle.........................................................................................................9
7. List the items you would recommend for inclusion in the budgets for Houzit Pty Ltd.........10
8. List the new or modified internal controls that could improve risk management for Houzit
Pty Ltd including the maintenance of audit trails..........................................................................10
Bibliography..................................................................................................................................13

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Profit and Sales Budget
Sales and profit Budget
Profit Budget 2011/12 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue % 100% 20% 24% 26% 30%
Sales
$
16,971,236.60
$
3,394,247.32
$
4,073,096.78
$
4,412,521.52
$
5,091,370.98
_cost of goods sold
$
9,673,605.00
$
1,934,721.00
$
2,321,665.20
$
2,515,137.30
$
2,902,081.50
Gross Profit
$
7,297,631.60
$
1,459,526.32
$
1,751,431.58
$
1,897,384.22
$
2,189,289.48
Gross Profit % 43% 43% 43% 43% 43%
Expenses
_ Accounting fees
$
10,000.00
$
2,500.00
$
2,500.00
$
2,500.00
$
2,500.00
_ Interest Expenses
$
84,508.00
$
21,127.00
$
21,127.00
$
21,127.00
$
21,127.00
_ Bank Charges
$
1,600.00
$
400.00
$
400.00
$
400.00
$
400.00
_Depreciation
$
170,000.00
$
42,500.00
$
42,500.00
$
42,500.00
$
42,500.00
_Insurance
$
13,390.00
$
3,347.50
$
3,347.50
$
3,347.50
$
3,347.50
_ Store Supplies
$
3,749.20
$
750.00
$
900.00
$
974.00
$
1,124.76
_advertising
$
350,000.00
$
200,000.00
$
50,000.00
$
50,000.00
$
50,000.00
_ cleaning
$
16,282.24
$
3,256.45
$
3,907.74
$
4,233.38
$
4,884.67
_ Repair and
maintenance
$
64,272.00
$
12,854.40
$
15,425.28
$
16,710.72
$
19,281.60
_ Rent
$
2,640,508.00
$
660,127.00
$
660,127.00
$
660,127.00
$
660,127.00
_ Telephone
$
14,996.80
$
2,999.36
$
3,599.23
$
3,899.17
$
4,499.04
_ Electricity Expenses
$
26,780.00
$
5,356.00
$
6,427.20
$
6,962.80
$
8,034.00
_ Luxury Car tax
$
32,163.00
$
8,040.00
$
8,040.00
$
8,040.00
$
8,040.00
_Fringe Benefits tax
$
32,163.00
$
7,000.00
$
7,000.00
$
7,000.00
$
7,000.00
_ Superannuation
$
187,020.00
$
37,404.00
$
44,884.80
$
486,280.00
$
5,610,600.00
_ wage and salaries
$
207,800.00
$
41,560.00
$
49,872.00
$
54,028.00
$
62,340.00
_Payroll tax
$
9,870.50
$
1,974.10
$
2,368.92
$
2,566.33
$
2,961.15

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_workers'
Compensation
$
4,156.00
$
831.20
$
997.44
$
1,080.56
$
1,246.80
Total Expenses $ 2,812,141.24
$
696,730.71
$
701,773.95
$
697,331.77
$
713,837.61
Net Profit (before
tax) $ 4,505,653.36
$
762,795.61
$
1,049,657.63
$
1,200,052.45
$
1,306,580.63
Income tax $ 1,340,250.24
$
228,838.68
$
314,897.29
$
360,015.73
$
391,974.19
Net Profit $ 3,165,403.12
$
533,956.93
$
734,760.34
$
840,036.71
$
914,606.44
Sales budget for the financial year 2011-2012
Total Budget: 16971237
Departmen
t
Sale
percentage
(%)
Total budget
2011-2012
Qtr 1 Qtr 2 Qtr 3 Qtr4
20% 24% 26% 30%
Bathroon
fitting 30%
$
5,091,371.10
$
1,018,274.2
2
$
1,221,929.0
6
$
132,756.49
$
152,741,133.0
0
Bedroom
fitting 25%
$
4,242,809.25
$
848,561.85
$
1,018,274.2
2
$
1,103,130.4
1
$
1,272,842.78
Mirrors 15%
$
2,545,685.55
$
509,137.11
$
610,964.53
$
661,878.24
$
763,705.67
decorative
items 10%
$
1,697,123.70
$
339,424.74
$
407,309.69
$
441,252.16
$
509,137.11
lighting
fixtures 20%
$
3,394,247.40
$
678,849.48
$
814,619.38
$
882,504.32
$
1,018,274.22
Total 100% 1697123700 339424740 407309688 441252162 5091371.1
Departmen
t
Sale
percentage
(%)
Total budget
2011-2012
Qtr 1 Qtr 2 Qtr 3 Qtr4
20% 24% 26% 30%
Total 100%
$
16,971,237.00 3394247.4 4073096.88 4412521.62 0

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GST Cash Flow Analysis/ Budget
GST Cash Flow Analysis/budget
Cash flow analysis -
GST 2011/12 Qtr 1 ( 20%) Qtr2-(24%) Qtr3 (26%) Qtr4 (30%)
GST collected
$
1,697,123.70
$
339,424.74
$
407,309.69
$
441,252.16
$
509,137.11
Less GST paid
$
1,281,358.30
$
256,271.66
$
307,525.99
$
333,153.16
$
36,407.49
GST payable
$
1,568,988.40
$
83,153.08
$
99,783.70
$
108,099.00
$
472,729.62
Debtors Ageing Budget
Debtors Ageing Budget
Aged debtor
budget
total budget
2011/12
Qtr 1 Qtr2 Qtr 3 Qtr4
20% 24% 26% 30%
Sales
$
16,971,237.00
$
3,394,247.40
$
4,073,096.88 4412521.62 5091371.1
% debtor
balance 20% 20% 20% 20%
Total debtor
$
678,849.48
$
814,619.38
$
882,504.32
$
1,018,274.22
total debtor % 100%
90 days 1%
$
6,788.49
$
8,146.19
$
8,825.04
$
10,182.74
60 days 5%
$
33,942.47
$
40,730.97
$
44,125.22
$
50,913.71
30 days 10%
$
67,884.95
$
81,461.94
$
88,250.43
$
101,827.42
current 84%
$
570,233.56
$
684,280.28
$
741,303.63
$
855,350.34
B: Budget Notes:

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The notes are inclusive of the following items:
 Update the suppositions of spending
 The bottlenecks have been reviewed
 The focus has been step costing
 Available amount of subsidizing
 Attain the income conjecture
 Attain the spending plan for the office
 Attain the demands for the purpose of capital spending
 Update the spending framework
 Assessment of the financial plan
 Issuance of the financial plan
 Load the financial plan
Budget Implementation
 Generation of revenue and mobilisation
 Award of the agreement as mentioned in the budget
 Fund release
 Physical supervision of the programmes and the project sites
Budget Audit
 Physical evaluation in order to ascertain the value for money
 Restrict and reduce the effect of the losses and the frauds
 Ascertain the violations or the compliance of the financial rules and processes
 Receipt of the overview of the expenses and the revenue

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 Ministerial monitoring of the procedure
1. Identify the current statutory requirements for tax compliance and list and
calculate the tax liabilities for Houzit Pty Ltd under taxation legislation
The current compliance requirements and the liabilities for the company under the
Corporations Act of 2001 are given as follows:
Income Tax: This is known as the tax that each and every company and entity has to pay on
their net income that is earned within a year.
GST: This is the tax that is paid by the companies, which provides any kind of services and
goods. This tax can be different with respect to the sort of services and goods and certain things
that could be free from this kind of tax.
Company Tax: This tax is paid by the organizations on the total assessable income and the tax
rate is fixed and the percentage is 30% of the overall income.
Superannuation: This is the tax that is paid by the companies on behalf of their employees and
it is computed by the payroll process of the companies.
The tax that is calculated for the company has been given as follows:
Income Tax: $436,878
Payroll Tax: $98,705
Superannuation: $187,020
Fringe Benefit Tax: $28,000
Luxury Car Tax: $12,000

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2. Identify the current compliance requirements and liabilities for this organisation
under the Corporations Act 2001.
In accordance to the Corporations Act 2001, the companies need to maintain the statement of
the financial performance and the financial position statement with them. The records that are
required to be maintained are explained as follows:
 Financial Statement
 Cash Record
 Debtor/ Sales Record
 Creditors Record
 Superannuation and wages record
3. Review commercially available financial management software to select the most
suitable software for Houzit Pty Ltd.
The assessment of the current software accounting process that is utilised by Houzit Pty leads
to the discovery and development of the software and the hardware that can be implemented by
the companies. The organization in an effective manner exploits the most innovative and the
current software but is limited to the utilisation of only computers and does not use phone or any
other electronic gadgets. The non-existence of the servers and the latest and innovative
technologies may not be supportive in protecting the data and even ensures financial
confidentiality of the organization. The company can even exploit the SAP software but as the
company is small, the incorporation of SAP can be expensive. The other software is the arrow
business software creators that have user experience with dynamic and standardised menu dock
able panels and unified integration to MYOB and Quick Books.

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These two software are notable towards what they perform. Both the software have similar
weaknesses and strengths. But after the development of the accounts of the business there can be
little disapproval that is seen in one of these products for Houzit. It is seen that Quick Book is not
supported in Macbooks and MYOB on the other permits multiplication inventory and on the
other hand the Quick Book does not do the same. MYOB permits several entities at one time but
Quick Book does not. Therefore, for Houzit Pty Plc MYOB is recommended after assessing the
other kinds of software.
4. Explain how you can apply the following principles of accounting in developing the
budgets required for this task:
 Matching principle
 Account groups
 Time periods
Matching Principles:
A precise and authentic budget can be constructed by utilising the matching principle that
will be helpful in mitigating and reducing the unfavourable variances. An example can be taken
as for the fact that the matching principle helps the company to identify the percentage of the
expenses which are gained from sales.
Account Groups
The account group has a key role to play in order to reduce and mitigate the chaos, which can
be constructed during the framing and computation of the final accounts. By taking assistance of
the account group, the company is able to discover the supportive incomes and the expenses,
which Houzit undertakes during the accounting year.

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Time Period
The time period is utilised primarily in discovering the debtor payment period, which is
significant and mandatory for the company in order to maintain their extent of liquidity. The
collection time of the debtors primarily helps the maintenance of the budget and addresses the
adequate cash availability during the current accounting year.
5. Explain and discuss the implications of probity when preparing and revising
budgets
Probity is primarily helpful in explaining the implications and consequences of the budget.
They have been explained as follows:
 It brings forth transparency and purity and even addresses a clear image and liability of
the overall financial report, which is disclosed by the organization.
 It is helpful in eliminating partiality and introducing validity and authenticity in the data
and the records which are constructed by the company.
 It is significant to explain the security and the confidentiality of the data which are used
in order to calculate the actual and the overall budget of the company.
6. List the critical dates and initiatives that will require or generate resources for
Houzit Pty Ltd in the next financial cycle
The significant time for the construction of the budget is generally subsequent to the
disclosure of the financial records and statements at the end of the accounting year. The date of
constructing a budget can be helpful to the company in projecting the overall expenditure, which
are paid out during the several quarters of the accounting year.
The dates are as follows:

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 $100000 taken as loan on December 31st
 Advertisement budget increased by $70,000 in the year 2011/12
 Rise in the amount of wages and salaries to $172,500 in the year 2011/12
7. List the items you would recommend for inclusion in the budgets for Houzit Pty Ltd
The entire amount of tools and items that can be incorporated in the future and the coming
budget are highlighted as follows:
 The incorporation of an accounting process that will be used as a tool for the purpose of
budgeting in order to perform accurately and in a precise manner.
 The utilisation of practical and fair valuation mechanism for the projection of the budget
that can be helpful in reducing the variances that are unfavourable in nature.
 The improvement and development on the privacy and safety that can be helpful in
reducing the extent of influences that may take place during the computation of the
budget.
 Amenities for the employees
 Transpiration
 Office costs
 Water bill
8. List the new or modified internal controls that could improve risk management for
Houzit Pty Ltd including the maintenance of audit trails
The enhanced internal controls that could develop the process of risk management for the
organization are:
 The company needs to follow the regulations and the rules

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 The company even needs to incorporate and apply all the processes
 The operating hours and the time sheets need to be noted as well.

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